French brokerage Newedge today unveiled plans for an extensive restructure that will see the company split out its execution business into an agency only broker. The announcement comes amid a hostile trading and regulatory environment that "calls for action", the company's chief executive said.

Newedge, which is jointly owned by French banks Crédit Agricole and Societe Generale and which has been up for sale for more than a year, according to reports, said in a statement this afternoon that it would split its futures clearing and execution businesses into two separate entities.

Nicolas Breteau, chief executive of Newedge, told Financial News this afternoon that difficult market conditions combined with new regulatory developments had forced the company to review its strategy.

He said: "We are operating in a difficult environment: volumes are down, interest rates are flat, volatility is down, and the pressure from the regulators is extremely strong. I think the industry is at a turning point: this environment calls for action and therefore we have proposed a plan to the board."

The proposed restructure will allow the group to reduce its overall capital burden – which will grow under new international capital rules – by pushing its execution business into a separate agency brokerage. Agency brokers take on little risk and are therefore subject to lower capital requirements than banks.

Breteau said: "It's not optimal to pursue execution with a banking license, therefore we're splitting the two businesses into separate but close entities. The clearing, prime brokerage and balance sheet activity, will remain under the banking entity. As a group we tend to compete with two types of entities: in the clearing and prime brokerage business we compete with bulge bracket dealers, but in the execution business we tend to compete more with inter-dealer brokers."

Newedge provides multi-asset execution, clearing and financing services for small trading firms and buyside institutions which are not members of futures exchanges or clearing houses. The company is one of the biggest so-called 'futures commissions merchants' in the world with 3,000 employees spread across 20 locations, according to its 2011 annual report.

The industry has been buffeted by an unwillingness among institutional investors to take on risk which has in turn reduced trading and clearing volumes, and by rising compliance costs. The sector has also been rocked by two scandals, the collapse of MF Global in October last year and the bankruptcy of Peregrine Financial in July.

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According to a recent report by consultancy Tabb Group, revenues across the futures commissions merchants business fell 42% in the past five years. However, Tabb Group also noted that the new regulatory landscape "will favour larger FCMs that provide investors with cutting-edge execution technology, efficient ways to manage and deploy capital and improved customer service".

Newedge is planning to simplify its business activities and geographical footprint, and streamline its operations to reduce costs, Breteau added: "The supermarket approach is no longer valid: we have to focus on our core competencies and the same is true of the geographies we operate in," he said. "There will inevitably be some consequences for staff. However, this plan will allow us to end up as a winner amid a period of consolidation which is undoubtedly coming to the industry."